The Finance Sector Union has raised concerns that jobs will be lost if a planned class action against bank fees is successful.

The class action will allege Australians have been illegally charged more than $5 billion in bank fees over the past six years.

Leon Carter of the Finance Sector Union says while the lawsuit is a good way to bring attention to the issue, it has the potential to backfire.

"Our concern is that if this lawsuit is successful, the banks will simply make their money up somewhere else or, even worse, sack staff to recoup any costs," he said.

"The only long-term solution to this problem is better regulation."

However, Bernard Murphy from the law firm running the action, Maurice Blackburn Lawyers, says something has to be done.

"There's no doubt that we have a good argument. Whether it will be successful, that's a matter probably for the High Court," he said.

The case will initially be heard in the Victorian Supreme Court, but it is possible there may be appeals extending to the High Court and lasting several years.

Up to 500,000 Australians are expected to join the class action against local and foreign banks for repayment of dishonour and late fees.

Financial Redress, a subsidiary of litigation funder IMF, is funding the litigation against 12 banks based on the claim that the fees are illegal because they amount to a penalty rather than a legitimate fee.

Financial Redress managing director James Middleweek says the action will try to recoup as much of that $5 billion as possible, but it depends how many people make claims.

"Realistically if we got 300,000, 400,000 people to sign up over the course of the next few weeks and months we'd have a sort of 600, 700, 800 million [dollar] class action," he said.

Mr Murphy says the public response has been overwhelming, with 3,000 registrations on the company's website as of last night.

"We're the largest class action law firm in the country and we've never seen a response like it," he said.

Action against penalties

Mr Murphy says the case will hinge on contract law and the fact that penalty fees are in excess of what it costs the banks to process late payments or bounced cheques.

"There's a contract law provision which states that if one party breaches a contract the victim of the breach is only allowed to charge a genuine pre-estimate of the damages for that," he said.

"So the situation we have here is that a person overdraws the account in breach of the contract with the bank and the bank's entitled to charge a genuine pre-estimate of the actual cost of that.

"Now that genuine pre-estimate would be, in some cases in relation to credit cards overdrawn, several cents. In relation to cheques, maybe $2.

"They've [banks] been charging $25 to $60. So we say the charges are extravagant and exorbitant. The law says that if those charges are extravagant or exorbitant then they amount to a penalty, which is illegal.

"It's a very substantial action because, for example, in 2008 alone the Reserve Bank states that these exception fees totalled $1.2 billion.

"So there is an estimated claim value in the order of $5 billion."

Australian banks have anticipated the threat to their fees and last year they started winding them back.

National Australia Bank was one of the first to move to scrap dishonour fees, which is estimated to have cost NAB alone about $100 million.

"We see this as a first step, a small step in rebuilding our reputation which we've called out as a strategic issue," National Australia Bank chief executive Cameron Clyne said last year.

"As I said today this fee generates one in two of all the complaints the bank receives so we think it's a pretty good place to start."

Consumer group Choice believes there will be strong public interest in a class action.

Choice spokesman Christopher Zinn says he has joined the class action as a private individual because there is an important legal issue to be tested.

"We would imagine that there is real appetite for remedy on behalf of the public," he said.

"[Over the years we've had feedback such as people] writing to the bank saying what are you doing charging us these very high fees for what are often fairly mundane breaches, [like] being a bit late paying a credit card transaction?"